Dow Chemical Clocks New 52-Week High - Analyst Blog
10 Mai 2013 - 5:30PM
Zacks
Dow Chemical (DOW)
reached a new 52-week high of $35.06 on May 9, eclipsing its
previous high of $34.83. Its shares clocked $34.92 at the end of
the trading session on that day.
The U.S. chemical kingpin, which has a market cap of roughly $42
billion, has seen its shares pop roughly 9% year-to-date and 13%
over a year. Average volume of shares traded over the last three
months is around 7,764K.
What's Driving Dow?
Shares of Dow are heading higher following the company’s handy
earnings beat in first-quarter 2013, reported on Apr 25. Dow’s
profit soared 33% in the quarter on strength in its agriculture
business, buoyed by healthy demand from farmers. The company
registered record sales of seeds and crop protection products.
Dow racked up profit of $550 million or $0.46 a share compared with
$412 million or $0.35 a share earned a year ago. The company also
benefited from a nearly $300 million decline in raw material costs
in the reported quarter.
Barring one-time items, the company earned $0.69 a share in the
quarter, up from $0.61 a year ago. That trounced the Zacks
Consensus Estimate of $0.60.
However, sales fell 2% in the quarter as gains across agricultural
sciences and electronic and functional materials were marred by
declines in other businesses.
Dow is well placed to reap the benefits of strong fundamentals
across agriculture and food markets. A string of innovative
products in its pipeline adds to its strength.
Moreover, Dow is seeing significant feedstock advantage in North
America. The company’s investments in U.S. Gulf coast and Middle
East are focused on boosting this advantage.
In addition, Dow remains focused on offering incremental returns to
its shareholders leveraging its healthy cash flows. The company
offers a healthy dividend yield of 3.7%.
Dow also continues debt repayments having reduced its debt by over
$900 million in the first quarter. Moreover, it continues its
cost-reduction efforts under its “Efficiency for Growth” program.
Dow’s cost-containment measures and restructuring initiatives are
expected to fetch a combined annual savings of $2.5 billion with $1
billion expected this year.
That said, we account for the weakness across electronics and
construction end-markets. Moreover, Dow still faces challenges in
Western Europe due to the difficult economic conditions and is
exposed to significant pension headwinds. As such, the stock
currently keeps a short-term (1-3 months) Zacks Rank #3 (Hold).
Other Stocks to Consider
Other companies in the chemical space that are worth considering
include Shin-Etsu Chemical Co., Ltd. (SHECY),
Celanese Corporation (CE) and FMC
Corp. (FMC). While Shin-Etsu Chemical retains a Zacks Rank
#1 (Strong Buy), both Celanese and FMC hold a Zacks Rank #2
(Buy).
CELANESE CP-A (CE): Free Stock Analysis Report
DOW CHEMICAL (DOW): Free Stock Analysis Report
FMC CORP (FMC): Free Stock Analysis Report
SHIN-ETSU CHEM (SHECY): Get Free Report
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